<PAGE> 1
--------------------------------------------------------------------------------
FPA PERENNIAL FUND INC.
Semi-Annual Report
June 30, 1995
--------------------------------------------------------------------------------
<PAGE> 2
OFFICERS AND DIRECTORS
DIRECTORS
George H. Michaelis, Chairman of the Board
John P. Endicott
Leonard Mautner
Lawrence J. Sheehan
Kenneth L. Trefftzs
OFFICERS
Christopher Linden, President and
Chief Investment Officer
William M. Sams, Executive Vice President
Lawrence P. McNeil, Senior Vice President
Eric S. Ende, Vice President
Julio J. de Puzo, Jr., Treasurer
Sherry Sasaki, Secretary
Christopher H. Thomas, Assistant Treasurer
INVESTMENT ADVISER
First Pacific Advisors, Inc.
11400 West Olympic Boulevard, Suite 1200
Los Angeles, California 90064
DISTRIBUTOR
FPA Fund Distributors, Inc.
11400 West Olympic Boulevard, Suite 1200
Los Angeles, California 90064
COUNSEL
O'Melveny & Myers
Los Angeles, California
CUSTODIAN & TRANSFER AGENT
State Street Bank and Trust Company
Boston, Massachusetts
SHAREHOLDER SERVICE AGENT
Boston Financial Data Services, Inc.
P.O. Box 8500
Boston, Massachusetts 02266-8500
(800) 638-3060
(617) 328-5000
This report has been prepared for the information of shareholders of FPA
Perennial Fund, Inc., and is not authorized for distribution to prospective
investors unless preceded or accompanied by an effective prospectus. The
financial information included in this report has been taken from the records
of the Fund without examination by independent auditors.
1
<PAGE> 3
LETTER TO SHAREHOLDERS
Dear Fellow Shareholders:
Your Fund's net asset value per share (NAV) closed on June 30, 1995 at
$21.20. The NAV reflects the distribution on January 9, 1995 to shareholders
of record on December 30, 1994 of $0.25 from net investment income and $2.48
from net realized capital gains.
For the six months ended June 30, 1995, the Fund's NAV increased 10.2%,
which includes the reinvestment of distributions paid, compared with a gain of
20.2% for the Standard & Poor's 500 Stock Index (S&P 500) also on a
reinvestment basis.
Historically the Fund's results have lagged sharply rising markets. Thus
while the magnitude of the recent relative underperformance is disappointing,
the failure to keep pace with such a sharp stock market gain was not
surprising. Several of our largest positions only increased modestly in price
in the first half. Most notably, Bandag, our largest position, which we
discussed in the 1994 Annual Report, rose only 7.0% compared with an 18.6%
price only gain for the S&P 500. Additionally, two of our top five holdings
rose slightly, Marsh & McLennan was up 2.4% and Lubrizol only 4.4%. Partially
offsetting these relative laggards was the performance of the remainder of the
top five, Johnson and Johnson up 23.5% and Washington Federal up 25.2%. The
experience of our largest holdings is typical, with the majority of our
portfolio increasing in price at a below average rate. We do not think that
the first half of 1995 is representative of the type of relative performance
our share holdings will provide in the coming year. On the contrary, the
Fund's portfolio has the potential to provide above average returns from the
combination of yield, growth and share buy-backs considerably above that of the
average company in the S&P 500. THE LINK BETWEEN SHAREHOLDER RETURNS AND THE
PROFITABILITY OF THE UNDERLYING BUSINESS HAS NOT BEEN BROKEN.
Marsh & McLennan, our second largest holding, exemplifies the kind of
investment in which we have so much confidence. Marsh & McLennan, the world's
number one insurance broker, also provides investment management through Putnam
Investments and employee benefits consulting through Mercer Consulting Group.
Marsh & McLennan's trailing twelve month return on assets is 10% and its return
on equity 25%. Its balance sheet is solid and earnings per share growth has
averaged about 12% per year over the last ten years, growing very rapidly early
on, plateauing for a number of years and finally increasing again over the last
several years. These results are impressive in light of the
2
<PAGE> 4
difficult conditions which have prevailed in Marsh & McLennan's principal
business, insurance brokerage, over much of that period. Commercial insurance
rates, the underlying basis for Marsh & McLennan's fees, have been declining
for most of the last eight years. In recent years, the boom in investment
assets at Putnam has been an offsetting positive.
The future for Marsh & McLennan is bright. Stabilization in insurance
rates should lead to earnings growth of at least 8-10% which seems achievable
from the operation (market share gains, acquisitions, etc.) of the dominant
brokerage business and continued gains by Putnam and Mercer. Combined with a
3.5% beginning yield, the growth produces a 12-13% return to shareholders
before the effect of any share repurchase. Any sustained stability or growth
in insurance rates could lead to sharply higher growth and returns.
Also on a positive note, we are proposing to the Fund's Board of Directors
that Eric S. Ende be elected to Executive Vice President of the Fund. This new
position recognizes the contribution Eric has made in the eleven years he has
worked closely with George Michaelis and me. Eric is a graduate of Yale
University with a Master of Arts from Oxford University and a Master of
Business Administration from New York University. Before joining First Pacific
Advisors in 1984, he worked for the J. Paul Getty Trust, Occidental Petroleum
and Ford Motor Company.
Respectfully submitted,
Christopher Linden
President
July 27, 1995
3
<PAGE> 5
MAJOR PORTFOLIO CHANGES
Six Months Ended June 30, 1995
<TABLE>
<CAPTION>
Shares or
Principal
Amount
---------------
<S> <C>
NET PURCHASES
COMMON STOCKS
Caraustar Industries, Inc. (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,500 shs.
Cooper Tire & Rubber Company (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,100 shs.
Dames & Moore, Inc. (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,700 shs.
Grainger (W.W), Inc. (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,400 shs.
Hubbell Incorporated (Class B) (1) . . . . . . . . . . . . . . . . . . . . . . . . . . 14,100 shs.
Juno Lighting, Inc. (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,600 shs.
Manpower Inc. (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,800 shs.
Reebok International Ltd. (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,400 shs.
Toys "R" Us, Inc. (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,900 shs.
NET SALES
COMMON STOCKS
Abbott Laboratories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,200 shs.
Baush & Lomb Incorporated (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,700 shs.
Cedar Fair, L.P. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,200 shs.
Emerson Electric Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,000 shs.
Garan, Incorporated (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,400 shs.
Golden West Financial Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,900 shs.
John Alden Financial Corporation (2) . . . . . . . . . . . . . . . . . . . . . . . . . 29,600 shs.
Johnson & Johnson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,400 shs.
Kelly Services, Inc. (Class A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,300 shs.
McDonald's Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,500 shs.
Minnesota Mining and Manufacturing Company . . . . . . . . . . . . . . . . . . . . . . 17,700 shs.
Moorco International Inc. (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,500 shs.
Nalco Chemical Company (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,900 shs.
Pfizer Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,400 shs.
VF Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,600 shs.
Walgreen Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,700 shs.
Washington Federal, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,000 shs.
CONVERTIBLE SECURITIES
Cross Timbers Oil Company -- 5 1/4% 2003 (2) . . . . . . . . . . . . . . . . . . . . . $ 740,000
Guilford Mills, Inc. -- 6% 2012 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . $ 570,000
NON-CONVERTIBLE SECURITY
Dr. Pepper/Seven-Up Companies, Inc. -- 0/11 1/2% 2002 (2) . . . . . . . . . . . . . . . $1,000,000
</TABLE>
(1) Indicates new commitment to portfolio
(2) Indicates elimination from portfolio
4
<PAGE> 6
PORTFOLIO OF INVESTMENTS
June 30, 1995
<TABLE>
<CAPTION>
COMMON STOCKS Shares Cost Value
----------------------------------------------------------------- ------ ---------- ----------
<S> <C> <C> <C>
PRODUCER DURABLE GOODS -- 13.4%
Bandag, Incorporated (Class A) . . . . . . . . . . . . . . . . . 41,400 $1,751,959 $2,370,150
Dover Corporation . . . . . . . . . . . . . . . . . . . . . . . . 6,000 341,170 436,500
Emerson Electric Co. . . . . . . . . . . . . . . . . . . . . . . 15,700 442,662 1,122,550
Grainger (W.W.), Inc. . . . . . . . . . . . . . . . . . . . . . . 9,400 543,666 552,250
Hubbell Incorporated (Class B) . . . . . . . . . . . . . . . . . 14,100 588,253 796,650
Kimball International, Inc. (Class B) . . . . . . . . . . . . . . 23,900 685,171 633,350
Watts Industries, Inc. (Class A) . . . . . . . . . . . . . . . . 26,000 604,775 650,000
---------- ----------
$4,957,656 $6,561,450
---------- ----------
BANKING AND FINANCIAL SERVICES -- 11.6%
Bancorp Hawaii, Inc. . . . . . . . . . . . . . . . . . . . . . . 38,300 $1,123,741 $1,149,000
First National Bank of Anchorage, The . . . . . . . . . . . . . . 870 450,975 1,313,700
Golden West Financial Corporation . . . . . . . . . . . . . . . . 23,300 947,634 1,098,012
Mercantile Bankshares Corporation . . . . . . . . . . . . . . . . 33,050 360,267 739,494
Washington Federal, Inc. . . . . . . . . . . . . . . . . . . . . 63,589 465,518 1,383,061
---------- ----------
$3,348,135 $5,683,267
---------- ----------
RETAILING -- 10.7%
Arbor Drugs, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 71,850 $ 892,138 $1,149,600
Bob Evans Farms, Inc. . . . . . . . . . . . . . . . . . . . . . . 33,900 719,757 686,475
Gap, Inc., The . . . . . . . . . . . . . . . . . . . . . . . . . 24,400 800,138 850,950
McDonald's Corporation . . . . . . . . . . . . . . . . . . . . . 19,400 259,828 759,025
Toys "R" Us, Inc.* . . . . . . . . . . . . . . . . . . . . . . . 30,900 849,408 903,825
Walgreen Co. . . . . . . . . . . . . . . . . . . . . . . . . . . 17,700 630,165 887,212
---------- ----------
$4,151,434 $5,237,087
---------- ----------
MATERIALS -- 9.3%
Caraustar Industries, Inc. . . . . . . . . . . . . . . . . . . . 39,500 $ 708,975 $ 711,000
Loctite Corporation . . . . . . . . . . . . . . . . . . . . . . . 30,900 804,069 1,405,950
Lubrizol Corporation, The . . . . . . . . . . . . . . . . . . . . 48,400 928,944 1,712,150
Unifi, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,200 713,422 724,800
---------- ----------
$3,155,410 $4,553,900
---------- ----------
HEALTH CARE -- 8.5%
Abbott Laboratories . . . . . . . . . . . . . . . . . . . . . . . 21,500 $ 597,444 $ 870,750
Allergan, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 28,700 559,519 778,488
Johnson & Johnson . . . . . . . . . . . . . . . . . . . . . . . . 22,700 915,130 1,535,087
Pfizer Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,400 610,821 960,700
---------- ----------
$2,682,914 $4,145,025
---------- ----------
</TABLE>
5
<PAGE> 7
PORTFOLIO OF INVESTMENTS
June 30, 1995
<TABLE>
<CAPTION>
COMMON STOCKS--CONTINUED Shares Cost Value
----------------------------------------------------------------- ------- ----------- -----------
<S> <C> <C> <C>
CONSUMER NON-DURABLE GOODS -- 8.1%
Guinness PLC . . . . . . . . . . . . . . . . . . . . . . . . . . 109,600 $ 811,234 $ 823,096
Hasbro, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 37,200 1,296,314 1,181,100
Reebok International Ltd. . . . . . . . . . . . . . . . . . . . . 31,400 1,091,917 1,067,600
VF Corporation . . . . . . . . . . . . . . . . . . . . . . . . . 16,700 698,690 897,625
----------- -----------
$ 3,898,155 $ 3,969,421
----------- -----------
INSURANCE -- 8.0%
EXEL Limited . . . . . . . . . . . . . . . . . . . . . . . . . . 22,200 $ 948,699 $ 1,154,400
Horace Mann Educators Corporation . . . . . . . . . . . . . . . . 30,600 737,113 703,800
Marsh & McLennan Companies, Inc. . . . . . . . . . . . . . . . . 24,900 1,698,802 2,020,012
----------- -----------
$ 3,384,614 $ 3,878,212
----------- -----------
CONSUMER DURABLE GOODS -- 3.5%
Cooper Tire & Rubber Company . . . . . . . . . . . . . . . . . . 23,100 $ 554,688 $ 563,063
Genuine Parts Company . . . . . . . . . . . . . . . . . . . . . . 18,100 632,767 685,537
Juno Lighting, Inc. . . . . . . . . . . . . . . . . . . . . . . . 27,600 517,500 434,700
----------- -----------
$ 1,704,955 $ 1,683,300
----------- -----------
ENERGY -- 2.7%
Cross Timbers Oil Company . . . . . . . . . . . . . . . . . . . . 41,000 $ 533,000 $ 650,875
North European Oil Royalty Trust (CBI) . . . . . . . . . . . . . 48,800 404,577 658,800
----------- -----------
$ 937,577 $ 1,309,675
----------- -----------
BUSINESS SERVICES & SUPPLIES -- 2.3%
Kelly Services, Inc. (Class A) . . . . . . . . . . . . . . . . . 19,800 $ 451,586 $ 499,950
Manpower Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 23,800 617,763 606,900
----------- -----------
$ 1,069,349 $ 1,106,850
----------- -----------
ENTERTAINMENT -- 2.2%
Cedar Fair, L.P. . . . . . . . . . . . . . . . . . . . . . . . . 32,900 $ 625,100 $ 1,048,688
----------- -----------
MULTI-INDUSTRY -- 1.6%
Minnesota Mining and Manufacturing Company . . . . . . . . . . . 13,600 $ 556,786 $ 778,600
----------- -----------
ENGINEERING AND ARCHITECTURAL
SERVICES -- 1.4%
Dames & Moore, Inc. . . . . . . . . . . . . . . . . . . . . . . . 52,700 $ 662,268 $ 685,100
----------- -----------
TOTAL INVESTMENT SECURITIES --
COMMON STOCKS -- 83.3% . . . . . . . . . . . . . . . . . . . . . $31,134,353 $40,640,575
=========== -----------
</TABLE>
6
<PAGE> 8
PORTFOLIO OF INVESTMENTS
June 30, 1995
<TABLE>
<CAPTION>
Principal
Amount Cost Value
---------- -------- -----------
<S> <C> <C>
SHORT-TERM INVESTMENTS -- 16.2%
Short-Term Corporate Notes:
Amoco Company -- 5.95% 7/07/95 . . . . . . . . . . . . . . $1,000,000 $ 999,008
Coca-Cola Company, The -- 5.85% 7/11/95 . . . . . . . . . . 2,200,000 2,196,425
AT&T Company -- 5.95% 7/25/95 . . . . . . . . . . . . . . . 700,000 697,223
AT&T Capital Corporation -- 5.90% 7/26/95 . . . . . . . . . 2,100,000 2,091,396
Vulcan Materials Company -- 5.92% 8/01/95 . . . . . . . . . 1,200,000 1,193,883
State Street Bank Repurchase Agreement -- 5.5% 7/03/95
(Collateralized by U.S. Treasury Notes -- 6.5% 1996,
market value $747,338) . . . . . . . . . . . . . . . . . . 746,000 746,114
-----------
TOTAL SHORT-TERM INVESTMENTS . . . . . . . . . . . . . . . . $ 7,924,049
-----------
TOTAL INVESTMENTS -- 99.5% . . . . . . . . . . . . . . . . . $48,564,624
Other assets less liabilities -- 0.5% . . . . . . . . . . . . 238,406
-----------
TOTAL NET ASSETS -- 100% . . . . . . . . . . . . . . . . . . $48,803,030
===========
</TABLE>
*Non-income producing security
See notes to financial statements.
7
<PAGE> 9
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995
<TABLE>
<S> <C> <C>
ASSETS
Investments at value:
Investment securities -- at market value
(identified cost $31,134,353) . . . . . . . . . . . . . . . . . . . . $40,640,575
Short-term investments -- at cost plus interest earned . . . . . . . . 7,924,049 $48,564,624
-----------
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163
Receivable for:
Investment securities sold . . . . . . . . . . . . . . . . . . . . . . $ 401,253
Dividends and accrued interest . . . . . . . . . . . . . . . . . . . . 60,218
Capital Stock sold . . . . . . . . . . . . . . . . . . . . . . . . . . 922 462,393
----------- -----------
$49,027,180
LIABILITIES
Payable for:
Capital Stock repurchased . . . . . . . . . . . . . . . . . . . . . . . $ 149,903
Advisory fees and financial services . . . . . . . . . . . . . . . . . 34,763
Investment securities purchased . . . . . . . . . . . . . . . . . . . . 22,767
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,717 224,150
----------- -----------
NET ASSETS -- equivalent to $21.20 per share on 2,302,229
shares of Capital Stock outstanding . . . . . . . . . . . . . . . . . . . $48,803,030
===========
SUMMARY OF SHAREHOLDERS' EQUITY
Capital Stock -- par value $0.01 per share; authorized
25,000,000 shares; outstanding 2,302,229 shares . . . . . . . . . . . . $ 23,022
Additional Paid-in Capital . . . . . . . . . . . . . . . . . . . . . . . 36,496,469
Undistributed net investment income . . . . . . . . . . . . . . . . . . . 440,832
Undistributed net realized gain on investments . . . . . . . . . . . . . 2,336,485
Unrealized appreciation of investments . . . . . . . . . . . . . . . . . 9,506,222
-----------
Net assets at June 30, 1995 . . . . . . . . . . . . . . . . . . . . . . . $48,803,030
===========
</TABLE>
See notes to financial statements.
8
<PAGE> 10
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 211,459
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 541,022
----------
$ 752,481
EXPENSES -- Note 3:
Advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 185,134
Transfer agent fees and expenses . . . . . . . . . . . . . . . . . . . 27,229
Financial services . . . . . . . . . . . . . . . . . . . . . . . . . . 24,693
Audit fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,775
Registration fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,553
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,174
Directors' fees and expenses . . . . . . . . . . . . . . . . . . . . . 9,638
Legal fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,888
Reports to shareholders . . . . . . . . . . . . . . . . . . . . . . . . 2,424
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,260
Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 925 310,693
----------- ----------
Net investment income . . . . . . . . . . . . . . . . . . . . . $ 441,788
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments:
Proceeds from sales of investment securities (excluding
short-term investments with maturities of 60 days or less) . . . . . . $14,998,429
Cost of investment securities sold . . . . . . . . . . . . . . . . . . 12,654,402
-----------
Net realized gain on investments . . . . . . . . . . . . . . . . . . $2,344,027
Unrealized appreciation of investments:
Unrealized appreciation at beginning of period . . . . . . . . . . . . $ 7,513,852
Unrealized appreciation at end of period . . . . . . . . . . . . . . . 9,506,222
-----------
Increase in unrealized appreciation of investments . . . . . . . . . 1,992,370
----------
Net realized and unrealized gain on investments . . . . . . . . $4,336,397
----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,778,185
==========
</TABLE>
See notes to financial statements.
9
<PAGE> 11
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1995 December 31, 1994
--------------------------- -----------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income . . . . . . . . . . . . $ 441,788 $ 1,179,908
Net realized gain on investments . . . . . . 2,344,027 5,882,814
Net unrealized appreciation (depreciation)
of investments . . . . . . . . . . . . . . 1,992,370 (6,912,053)
----------- ------------
Increase in net assets resulting
from operations . . . . . . . . . . . . . . . $ 4,778,185 $ 150,669
Distributions to shareholders from:
Net investment income . . . . . . . . . . . . $ (591,248) $ (1,525,514)
Net realized capital gains . . . . . . . . . (5,865,116) (6,456,364) (4,866,779) (6,392,293)
----------- ------------
Capital Stock transactions:
Proceeds from Capital Stock sold . . . . . . $ 2,204,581 $ 4,801,772
Proceeds from shares issued to
shareholders upon reinvestment of
dividends and distributions . . . . . . . . 5,685,121 4,341,556
Cost of Capital Stock repurchased . . . . . . (9,373,634) (1,483,932) (39,237,987) (30,094,659)
----------- ----------- ------------ ------------
Total decrease in net assets . . . . . . . . . $(3,162,111) $(36,336,283)
NET ASSETS
Beginning of period, including
undistributed net investment income
of $590,292 and $935,898 . . . . . . . . . . 51,965,141 88,301,424
----------- ------------
End of period, including undistributed
net investment income
of $440,832 and $590,292 . . . . . . . . . . $48,803,030 $ 51,965,141
=========== ============
CHANGE IN CAPITAL STOCK
OUTSTANDING
Shares of Capital Stock sold . . . . . . . . . 107,202 217,946
Shares issued to shareholders upon
reinvestment of dividends and
distributions . . . . . . . . . . . . . . . . 295,638 197,266
Shares of Capital Stock repurchased . . . . . . (465,579) (1,765,953)
----------- -----------
Decrease in Capital Stock outstanding . . . . . (62,739) (1,350,741)
=========== ===========
</TABLE>
See notes to financial statements.
10
<PAGE> 12
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING
THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Six
Months
Ended Year Ended December 31,
June 30, -------------------------------------------------------
1995 1994 1993 1992 1991 1990
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance:
Net asset value at beginning of period . . . . . $ 21.97 $ 23.76 $ 23.94 $ 22.40 $ 19.82 $ 22.60
------- ------- ------- ------- ------- -------
Net investment income . . . . . . . . . . . . . . $ 0.19 $ 0.46 $ 0.46 $ 0.52 $ 0.64 $ 0.77
Net realized and unrealized gain (loss)
on investment securities . . . . . . . . . . . 1.77 (0.48) 0.59 2.26 3.38 (0.55)
------- -------- ------- ------- ------- -------
Total from investment operations . . . . . . . . $ 1.96 $ (0.02) $ 1.05 $ 2.78 $ 4.02 $ 0.22
------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income . . . . . $ (0.25) $ (0.46) $ (0.47) $ (0.57) $ (0.73) $ (1.15)
Distributions from net realized
capital gains . . . . . . . . . . . . . . . . (2.48) (1.31) (0.76) (0.67) (0.71) (1.85)
------- ------- ------- ------- ------- -------
Total distributions . . . . . . . . . . . . . . $ (2.73) $ (1.77) $ (1.23) $ (1.24) $ (1.44) $ (3.00)
------- ------- ------- ------- ------- -------
Net asset value at end of period . . . . . . . . $ 21.20 $ 21.97 $ 23.76 $ 23.94 $ 22.40 $ 19.82
======= ======= ======= ======= ======= =======
Total investment return* . . . . . . . . . . . . 10.19% (0.03)% 4.64% 13.07% 21.69% 0.97%
Ratios/supplemental data:
Net assets at end of period (in thousands) . . . $48,803 $51,965 $88,301 $76,254 $63,757 $51,488
Ratio of expenses to average net assets . . . . . 1.26%+ 1.13% 1.02% 1.08% 1.10% 1.14%
Ratio of net investment income to
average net assets . . . . . . . . . . . . . . 1.79%+ 1.95% 2.03% 2.37% 3.11% 3.78%
Portfolio turnover rate . . . . . . . . . . . . . 33%+ 31% 43% 30% 33% 29%
</TABLE>
* Return is based on net asset value per share, adjusted for reinvestment of
distributions, and does not reflect deduction of the sales charge. The
return for the six months ended June 30, 1995 is not annualized.
+ Annualized
See notes to financial statements.
11
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
June 30, 1995
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 as a
diversified, open-end, management investment company. The following is a
summary of significant accounting policies consistently followed by the Fund in
the preparation of its financial statements.
A. Security Valuation
Securities listed or traded on a national securities exchange are valued at
the last sale price on the last business day of the period, or if there was
not a sale that day, at the last bid price. Securities which are unlisted
are valued at the most recent bid price. Short-term investments with
maturities of 60 days or less are valued at cost plus interest earned
which approximates market value.
B. Federal Income Tax
No provision for federal income tax is required because the Fund has
elected to be taxed as a "regulated investment company" under the Internal
Revenue Code and intends to maintain this qualification and to distribute
each year to its shareholders, in accordance with the minimum distribution
requirements of the Code, all of its taxable net investment income and
taxable net realized gains on investments.
C. Securities Transactions and Related Investment Income
Securities transactions are accounted for on the date the securities
are purchased or sold. Dividend income and distributions to shareholders
are recorded on the ex-dividend date. Interest income and expenses are
recorded on an accrual basis.
NOTE 2 -- PURCHASES OF INVESTMENT SECURITIES
Cost of purchases of investment securities (excluding short-term
investments with maturities of 60 days or less) aggregated $6,983,312 for the
six months ended June 30, 1995. Realized gains or losses are based on the
specific-certificate identification method. Cost of securities owned at June
30, 1995 was $31,134,891 for federal income tax purposes. Gross unrealized
appreciation and depreciation for all securities at June 30, 1995 for federal
income tax purposes was $9,857,294 and $351,610, respectively.
NOTE 3 -- ADVISORY FEES AND OTHER AFFILIATED TRANSACTIONS
Pursuant to an Investment Advisory Agreement, advisory fees were paid by
the Fund to First Pacific Advisors, Inc. (the "Adviser"). Under the terms of
this Agreement, the Fund pays the Adviser a monthly fee calculated at the
annual rate of 0.75% of the first $50 million of the Fund's average daily net
assets and 0.65% of the average daily net assets in excess of $50 million. In
addition, the Fund pays the Adviser an amount equal to 0.10% of the average
daily net assets for each fiscal year in reimbursement for the provision of
financial services to the Fund. The Agreement obligates the Adviser to
reduce its fee to the extent necessary to reimburse the Fund for any annual
expenses (exclusive of interest, taxes, the cost of any
12
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
Continued
supplemental statistical and research information, and extraordinary expenses
such as litigation) in excess of 1 1/2% of the first $30 million and 1% of the
remaining average net assets of the Fund for the year.
For the six months ended June 30, 1995, the Fund paid aggregate fees of
$9,500 to all Directors who are not affiliated persons of the Adviser. Legal
fees were for services rendered by O'Melveny & Myers, counsel to the Fund. A
Director of the Fund is of counsel to, and a retired partner of, that firm.
NOTE 4 -- DISTRIBUTOR
For the six months ended June 30, 1995, FPA Fund Distributors, Inc.
("Distributor"), a wholly owned subsidiary of the Adviser, received $2,824 in
net Fund share sales commissions after reallowance to other dealers. The
Distributor pays its own overhead and general administrative expenses, the cost
of printing prospectuses and the cost of supplemental sales literature,
promotion and advertising.
NOTE 5 -- DISTRIBUTION TO SHAREHOLDERS
On June 30, 1995, the Board of Directors declared a dividend from net
investment income of $0.19 per share payable July 15, 1995 to shareholders of
record on June 30, 1995. For financial statement purposes, this dividend was
recorded on the ex-dividend date, July 3, 1995.
13
<PAGE> 15
--------------------------------------------------------------------------------
Distributor:
FPA FUND DISTRIBUTORS, INC.
11400 West Olympic Blvd., Suite 1200
Los Angeles, California 90064
--------------------------------------------------------------------------------
